The volume of bolt-on acquisitions made by tech businesses across the UK in Q1 2023 was at its lowest levels since lockdown shook the M&A market in Q2 2020, according to Rickitt Mitchell’s Buy & Build Barometer.
The latest analysis from the corporate finance firm, conducted in partnership with Experian Market iQ, reveals 36 deals by tech companies completed in Q1 2023, down 33 per cent on Q4 2022 (54) and down 20 per cent on the same period last year (45).
The figures follow a period of change for the market, with big tech companies Meta, Google, Microsoft, IBM, Amazon and Spotify all making headcount reductions over the past six months, due to a post-covid economic slow-down, over hiring, high inflation and interest rate rises.
Despite the slowdown, several subsectors saw positive levels of activity. Information technology consultancy and IT service activities companies saw six acquisitions each. This includes ProPharma Group’s acquisition of Digital Lab Consulting, a provider of digital transformation expertise for life sciences organisations, and acquisition of Canadian digital solutions company Knoldus, by smart solutions provider NashTech.
The Buy & Build Barometer also monitored three acquisitions of technology driven environmental consulting companies in Q1 2023 – including the purchase of carbon consulting and software analytics company Carbon Architecture by Bellrock Group.
Notable buy and build activity in Q1 2023 includes IRIS Software Group’s acquisition of Georgia-headquartered cloud-based HCM enterprise software provider, Apex HCM; and a streak of four acquisitions by London-based cloud communications group Babble Cloud Holdings, that included purchase of Scottish IT support and managed services provider Cloudstream Technology; Kent IT services company Techquarters; and Lancashire tech company Stonegate Technologies.
On a regional level, South East England (9) and London (7) were the most active regions for tech buy-and-build activity, followed by East of England (3) and West Midlands (3). The North West, Yorkshire & The Humber, East Midlands, North East, Scotland and Northern Ireland each saw one acquisition each, whilst South West England, Wales and Republic of Ireland had zero.
Kaine Smith, Partner and Head of TMT at Rickitt Mitchell said: “The slow-down in tech buy-and-build activity is indicative of wider challenges in both tech and M&A that created a subsequent disparity between seller and buyer valuation expectations. Additionally, recent interest rate rises have limited the possibilities for leveraged deals, impacting the broader M&A landscape.
“When considering bolt-on acquisitions specifically, there has been a prevalent ‘wait and see’ approach from private equity-backed entities due to underlying macro-economic uncertainty. Despite these macro headwinds, Rickitt Mitchell’s four successful completions in the TMT sector thus far in 2023 is pleasing to see, and testament to the depth of our sector credentials, capabilities and global reach.”
Rickitt Mitchell is a boutique M&A advisory business. It specialises in providing high quality corporate finance advice to shareholders and owner managers that run successful businesses in the TMT sector.
